Have you ever wondered why Amazon is so famous worldwide and what its secret recipe might be? Amazon reported a net income of $33.36 Billion in 2021 and the Amazon Flywheel strategy is a huge factor responsible for their tremendous success.
This strategy has been successful not only for Amazon but also for Amazon sellers. Unlike Amazon’s other marketing strategies that rely on driving new traffic, Flywheel excels momentum and impacts all parts of your business, leading to a better customer experience, overall.
It also brings multiple benefits that enhance a seller’s business strategy and brings even more profit. Read along to find out almost everything related to it and why it’s such a special strategy for Amazon.
What Is Amazon Flywheel?
Another name of the Amazon Flywheel is Amazon Virtuous Cycle. It’s a strategy that uses customer experience in order to drive traffic to platforms and third-party vendors.
You must think of Amazon’s fair pricing, which attracts more customers and propels more sellers to join the marketplace and start running the wheel. It helps Amazon to start increasing differences between marketplace competitors in market share.
This way, Amazon keeps expanding rapidly, which lowers the price structure. Therefore, it generates more conversation between sellers and consumers.
Amazon Flywheel continues to gain momentum, which provides Amazon with more opportunities to upgrade price formula, lower prices, and reinvest money in other ventures.
Why Should You Use Amazon Flywheel?
Generally, customers satisfaction is at the heart of everything that Amazon does. As Amazon keeps growing, it needs more strategies to manage the whole operation of this platform. For example, Amazon Attribution tool for sellers keeps track of traffic sources.
Amazon Flywheel is one of those strategies that scale the price structure so that Amazon can allow the sellers to offer consumers an affordable price for products. Thus, it improves customer experience and encourages them to come back to Amazon again and again.
Now let’s talk about why you should use this strategy. Suppose you’re eligible to use this strategy, and as a seller, you can use it to drive traffic to your product detail pages.
In that case, your conversion rate will increase, so the selling rates will increase too. Plus, you can offer your customers a low price which will lure most of them back to you again for another purchase.
What Can You Do With Amazon Flywheel?
You can gain the below benefits with this strategy:
As we said above, customer experience is the heart of Amazon. When a customer comes to Amazon and finds it easy to shop with a good experience, they would buy more and come back to the same marketplace again.
Similarly, when a seller organizes their product listing with the first priority of customer experience, their conversion rate and brand affinity are more likely to be higher.
Success Is Continuous
The more you make sales, the better ranking you gain on Amazon. This strategy has been proven by Amazon SEO that when customers buy your products more than your competitors, it drives your listing close to the top of search results.
Through this high selling rate, you’re already giving Amazon more customers. And when you spend more on advertising to promote your products, it’ll push more conversions to your ASINs.
This process will make the flywheel begin, which will bring more success. As long as you’ll have your advertised product in stock, the flywheel keeps on moving.
Amazon account processes are all interlinked
It’s not possible to optimize different parts of your Amazon account individually as they are all interlinked with each other.
For example, you can increase conversion by optimizing the listing, which will let you gain an ample budget to advertise through DSP and Ad Console to promote impressions.
Using the Amazon Flywheel strategy will prove that Amazon account processes all work in a parallel way that will create a successful Amazon sales strategy. Besides boosting sales, sellers can increase internal account processes and maintenance.
How Does Amazon Flywheel Work On E-Commerce Platform?
Amazon made product pricing low for appealing to customers. And this pricing strategy leads Amazon to increase traffic due to better customer experience.
However, Bezos and his team thought they could reach out to more people if they welcomed third-party sellers to sell their products besides the Amazon-exclusive products. It not only affects their traffic on sites but also fuels the most crucial aspect – selection.
It may seem odd to anyone who just got to know that Amazon let their competitors join them. But remember, the first thing that Amazon prioritizes above all is customer experience.
All customers are attracted to low-cost products, and they are getting more facilities for Amazon besides the price. On the other hand, with many brands joining Amazon, it creates diversity and expands the supply, which results in further decreased costs.
So Amazon Flywheel is basically working to attract customers with low prices that increase sales. Then Amazon reinvests in the strategies that help them to lower the costs and develop a better customer experience.
Three Major Focuses Of Amazon Flywheel
Back in 2001, Jeff Bezos first came up with the idea of the Flywheel effect strategy. After that, the three most important focuses were identified that propelled Amazon to greatness:
- Low prices
- Huge selections
- Great delivery experience
The Amazon Flywheel is responsible for the fast growth of Amazon. The three major focuses of the Flywheel result in the improvement of sellers as well as Amazon.
How Effective Is Amazon Flywheel?
Amazon is the most significant global marketplace in today’s world. You won’t believe that back in 2021, Amazon had over 2.45 billion website visits per month! And there’s no other platform for retailers to gain this massive traffic.
According to Forbes, the stock price rose over $3200 at Amazon by July 2020. The pandemic situation can be the reason behind this success, as many people switched to online shopping after COVID-19.
In fact, the whole e-commerce industry around the world experienced growth during this time, and it’s not surprising at all that Amazon dramatically benefitted from it.
After inventing the Amazon Flywheel strategy, Jeff Bezos experiences massive growth. The proof of this statement is the Amazon company now has over 1 Million employees, and it’s a huge success considering Amazon’s beginning in 1994.
Currently, Amazon has hundreds of warehouses all over the world, and some of its warehouses are as big as a football field.
Who Can Use Flywheel?
Amazon Flywheel is a strategy that brings Amazon to the place where it is today. It has also helped sellers to grow and develop their business from the beginning.
And the good part is there are no specific criteria for sellers to be eligible to use it for their brand or business.
But it has some ways that begin the spin on the Flywheel. If you are a new seller on Amazon or an experienced one, you need to list your product in such a way that pushes the wheels to spin.
Applying Amazon Flywheel To Promote Your Brand/Business
Whenever you make some upgrade to your version of the flywheel model of business, it helps you increase the growth cycle and achieve your main business objective for the year.
However, there’s no specific way to apply for the Flywheel like brand registration; you need to start the Flywheel through your perforation on Amazon.
Amazon Flywheel principle:
Here are some ways that you can apply the Amazon Flywheel principle to your brands:
- No matter what you do on Amazon, make the customer experience your first priority as a seller.
- Learn terms and regulations of service of each marketplace and your operating channel to ensure healthy maintenance of account standing and performance metrics.
- Experiment with new initiatives at Amazon. For example, you can expand your advertising offerings to sustain and drive momentum to the cycle of growth.
- Monitor your product catalog performance daily. Figure out which are your top-selling products, underperforming SKUs, and so on. To start your own Flywheel, you need to provide value to Amazon through product selection, product life cycle, and performance, building an SKU strategy for advertising and pricing.
- Read the beginner’s guide to promote your detailed product pages to ensure that your product’s keywords, specifications, description, bullet points, and titles are engaging and perfectly inserted. Besides, you should consider answering some potential questions related to your product for customers.
- To promote your targeted customers’ loyalty, advocacy, and social proof, you should manage your brand reputation on Amazon. This way, you can generate more and more positive reviews that indirectly aid to rankings and overall sales rate.
So as you can see, fueling the Amazon Flywheel to its full motion isn’t an overnight process. This process solely depends on your business operating process, your unique strategy, and your performance.
In short, every optimization step you take to improve your business on Amazon can influence the Flywheel. That’s why you must work hard to improve your performance on Amazon to keep the Flywheel.
What Amazon Flywheel Is Not?
The Amazon Flywheel is a game-changer for most sellers and Amazon itself. But it’s not a tool or perform some specific roles. Here are some things that you should know not to confuse this strategy with something else:
A Line Of Business
This strategy isn’t a line of business, but it’s a momentum’s underlying architecture that can be renewed and extended into different businesses. New technologies of Amazon can accelerate the Flywheel that can turn the wheels from millions to billions.
A Line Of Priorities
Amazon Flywheel is a way of thinking and coming up with a good series of decisions with coherent concepts. You can’t push the Flywheel with money, but it’s totally customer-centric, giving the company momentum over time.
Pros And Cons Of Flywheel
There are many advantages that you can take by using the Amazon Flywheel strategy.
- As a seller, you can reach to more customers.
- You can generate more sales once you spin the Flywheel.
- Helps you to understand the Amazon account processes that increase the conversation and sales rate.
- To start the Flywheel, list your products in order and keep trying to boost your performance, which is an indirect advantage of the Flywheel.
- This strategy helps you remain competitive and lower the price at the same time which makes the customers want to purchase from you again.
Just like it has advantages, there are disadvantages of the Amazon Flywheel too. Here are the cons of this strategy:
- Takes a long time to show the effect that may discourage sellers from going after the flywheel strategy.
Amazon Sellers Flywheel: Is It a Myth?
Amazon Flywheel isn’t only about bringing more customers to Amazon and helping Amazon to be the world’s biggest e-commerce platform. It has another version that works for sellers’ success which is called Amazon Sellers Flywheel.
However, the main goal of the flywheel is growth. You need to put serious focus on three things when you want to grow your business on Amazon:
- Making more sales
- Getting more reviews
- Attaining better rankings
And this is exactly how the Amazon Flywheel works. When you spin the Flywheel finally, it’ll automatically bring more sales and reviews that’ll get you to the top position gradually. But you need to remember that to keep the Flywheel in motion, you must have your best-selling products in stock.
But to gain the above benefits, you need to ensure first that you’re making sales. It’s an integral part since the algorithm of Amazon relies on sales to decide which products to rank on the search result.
Now you may wonder how you can make the sale of your newly launched products. If you send your new products to Amazon’s warehouse, they’ll drive some traffic to your new listing for the honeymoon period.
But whether the customer will buy your products or not depends on how you have created your product page. Therefore you need to boost the conversion rate.
Tips you can follow to optimize your listing:
- Use bullet points to highlight the benefits of your products
- Put a list of all the specifications of your product
- Add high-quality images that describe the features visibly
This way, you can also boost the sales rate, and the more sales you’ll make, the more reviews you’ll get. Sometimes you should encourage your buyers to leave some reviews and good ratings as well.
However, make sure you never tell your buyers to leave a positive review only. If you operate as we describe above, the ultimate result of the Amazon Sellers Flywheel will be better rankings.
This way, Amazon may end up giving you an Amazon badge according to the quality of your products. As all the strategies of Amazon are connected with each other, as long as the seller’s Flywheel will spin, each aspect will fuel the others.
What is the Amazon wheel of growth?
When a customer visits any store, they look for 3 things: selection, price, and experience. Amazon drives selection at a great customer experience level by partnering with top sellers that leads to growth. As traffic grows, it brings in more sellers, and the Flywheel starts spinning faster, which becomes a great strategy for growth to Amazon.
Can the Amazon Flywheel be applied in any business model?
Amazon has developed the e-commerce Flywheel model that can be applied to any business model. But to move the Flywheel, you, as a seller, need to put lots of time and effort into building customer experience, so it may take longer time than you think.
How does Amazon communicate with its customers?
Amazon communicates with its targeted customers through advertisements. And another strategy for attracting customers is sales promotion at Amazon.
What does customer-centric mean for Amazon?
The current motto of Amazon is to be the most customer-centric company globally, where customers can find anything they want to buy online. And Amazon also wants to be the company where consumers can get their desired product at a low price compared to other e-commerce companies.
So now you have a clear idea about what Amazon Flywheel is, how it works, and how sellers and Amazon benefit from this strategy.
If you want to grow your business through the Flywheel strategy, you should keep in mind that you have to be patient and keep trying to improve your product’s life cycle. It may take a while for you to spin your own flywheel business.
Best of luck.